Ok, currently I store all my data on my Macbook's hard drive and also back it all up on a Western Digital "My Passport" portable external hard drive. Both of these are 500 Gb which has been fine for me up until now as this has been enough space.

Now however, Im just about at 500 Gb so I need to expand my storage systems, and I dont know where to start as Im not really clued up on computers.

What I was going to do was to just buy a larger external hard drive (something like this) and then back everything up on that and then just be selective about what I store on my laptop itself.

The problem I see with this is obviously Im not backing up all of my data, so if the external hard drive fails then I lose some data. This would mean I would have to buy two external hard drives and back everything up twice.

Because of this Im thinking about setting up a RAID array which is by the way something I know nothing about. Is this silly/overkill or the right thing to do in your opinion?

It sounds like a good idea! If you're a "computer noob", you probably don't have a dedicated raid card lying around, so you will have to go with software raid. This means you will have a bit more overhead (more CPU usage when transferring files, but this shouldn't be something to worry about.

For your situation, I recommend RAID 1. It's a very simple solution without any speed benefits/downsides. The data is just written to two drives. If one fails, you just have a spare drive.

RAID 5 on the other hand works a bit more complicated. It has a performance and storage advantage, but is more complicated to set up, and recover if things go bad.

There are some horror stories about raid when using identical drives:

One drive in the array fails, the others need to do a lot of extra work. The faile ddrive is replaced, and the array is rebuilt. This stresses the disks so much that the other drive fails, leaving you with nothing.

A great setup (provided you have an older computer laying around), is to build a home NAS (Network attached storage). This is what I have done (old pentium 4 box with 2 GBs of RAM and 4 drives.
I installed FreeNAS on it (has a very nice web interface), and configured it to my liking. It offers RAID, and can share files between windows, mac and Linux. Definitely worth checking out!

_________________I take pictures so quickly, my highschool was "Continuous High".

I'm a big fan of NAS (network attached storage) and my TS-639 Pro (now superseded by the TS-659 Pro) from QNAP has been fulfilling that role for me for well over a year now. Currently it has four of the six available bays filled with the array configured as RAID 5.

But, and it's a very big but, I still have backup copies of all the data stored on that NAS. Some RAID arrays may be fault tolerant if a single disk fails, though we've also had some discussion about the chances, or not, of a second failure during the rebuild of an array, but there still may be a more catastrophic failure which kills more than one hard drive at the same time in which case your data is gone unless also backed up elsewhere.

So I'd give a big thumbs up for NAS for the sheer convenience of having a large amount of storage readily available to more than one computer but it's not a good idea to use it as the only repository for your data even if a redundant RAID array is used. Fortunately external HDDs are pretty cheap these days so I'd say use those to regularly back up your data but disconnect them and store in a safe place between backups.

Stick 2 x Samsung F3 1TB in to start with (£40~ each) and expand for data redundancy/expansion as required.

The fastest possible interface with the lowest cpu usage is best if you plan to work from these drives in real time. If your macbook has FW800 definitely look into getting an enclosure that supports it as the increased speed will make it almost like working from a local drive.

If you don't plan to work live from the drives and are using them only for backup, then USB/Ethernet would be the only connections needed. Backing up over wifi with your macbook would be possible if you leave it to do it overnight if you do a lot of work, but say 4MB/s transfer rate over the network on 802.11g you could transfer 14GB in an hour ideally - let's say 8-10GB for the sake of argument. Unless you are making well over 10GB of changes per day then backing up via wifi is fine after you've done the initial over night backup.

I have a couple of clients using DROBO devices as their Time Machine Volumes (connected to Apple Mac's) and they are very happy with them.

Just remember it is always best to have 2 separate physical locations for your data and the DROBO or other RAID solution will only be 1. As well as disk drive failure you can also have a power supply fail (for the RAID enclosure) and this makes your data just as inaccessible.